ML Journal June 2022

ML Journal June 2022

Workforce Rebalancing Builds Pressure in the Pipeline

Understanding the differences between how employees and employers are reimagining work helps leaders build better future workforce strategies.   

Recent dramatic changes in the way we work, and how we think about work, have caused a tidal shift in how employees view their priorities and prospects in daily life.

The COVID-19 pandemic accelerated a work realignment trend that was already in progress, and further transformed people’s understanding of work success, purpose, and value.

Rising inflation, The Great Resignation, and calls for increased commitment and action on environmental, social, and governance (ESG) issues, are further reshaping a workforce terrain that manufacturers are all trying to navigate with new eyes. As the initial waves of health-driven change roll into new ones, the workforce is now resettling into pools based on how we work, what we value, and who we are.

It’s a new moment for both employees and employers alike, with new opportunities and a need for greater context around the how, what, and why of work. Understanding these key shifts will help manufacturers already dealing with the current labor crisis, better prepare new approaches to how they can successfully attract and retain their key workforce.

Work Reimagined

The EY 2022 Work Reimagined Survey reveals insights from more than 17,000 employees and 1,575 employers across 22 countries and 26 industries. The findings help highlight the primary motivators of workforce turnover and retention in today’s tight labor market and help highlight areas of focus for manufacturing leaders who are looking to lean into the opportunities of the moment.

“The industrialized world now finds itself poised to fully reimagine a more sustainable and human-centered workforce strategy.”

 

These insights are essential for manufacturing’s future. The industrialized world now finds itself poised to fully reimagine a more sustainable and human-centered workforce strategy. By responding decisively to the moment and recognizing the necessity for the sustainable transformation of business, employers now have an opportunity to redefine a new way of working that preserves the talent pipeline and future value.

Working in a Changed World

As much as the world would like to move beyond the COVID-19 pandemic and its effects, businesses still find themselves rocked by a world in flux, including in the ways we’re working. Both employers and employees necessarily focused on short-term decisions to forge through one of the biggest health challenges in a generation. But now attitudes and strategies toward work are being molded by other macrotrends. Recent analysis from The World Bank shows an expected slowing of economic growth and persistently high inflation over coming years, and an urgent need for coordinated action to address the severe costs of weather and climate disasters.

This backdrop colors the landscape for business investment and employee sentiment at a time when The Great Resignation appears to still be in full swing in some parts of the world.

For example, 68% of employers say employee turnover has increased in the past 12 months, with 43% of employees saying they are likely to leave their current employer in the next year. That’s a significant rise from 2021, when only 7% of employees said they’d be unlikely to stay. The groups most expecting to leave their jobs identified themselves as Gen Z or millennials in the United States (48%) and were mostly working in the technology/hardware sector (60%).

However, flexibility in work has been championed by employees and embraced by some employers over the last two years and has now become an expectation rather than a nice-to-have for most workers. Of those surveyed, 80% of employees want to work at least two days remotely per week. Just 20% of employees voiced reluctance toward fully remote working, compared to 34% last year, showing broader acceptance of working from anywhere.

Despite this signal from employees, nearly a quarter (22%) of surveyed employers say all employees are still expected to return to their place of work five days a week.

“The vast majority of employees and employers seem to agree that the old status quo of the working world is gone.”

 

These diverging perspectives between employers and employees on hybrid/flexible work is only one example of what could be seen as a rebalancing of leverage in favor of workers. Perceptions of workforce culture, productivity, advancement potential, and mobility also show significant differences between employers and employees and could further fuel an already hot race for talent.

Employees and Employers Have Divergent Views on Talent and Culture

With a workforce feeling more empowered and the labor market appearing increasingly liquid, many employers show declining levels of confidence in how their organizations are developing their cultures and maintaining productivity. Only 13% of employers say they agree that their culture has changed significantly and improved since the start of the pandemic, with the same number agreeing about productivity improvements. This is down from 22% and 21% respectively in 2021.

The details of employer sentiment, however, can vary widely. The survey data reveals three distinct segments of employers based on their perception of business productivity and organizational culture:

Optimists (32%)

Employers who have been proactive in their approach to flexible work, real estate, and technology are more likely to agree they’ve seen positive outcomes. These optimists, almost a third of the sample, indicate they feel they have more agency in the present uncertainty. By giving clarity to their workforce and leaning into the change, these businesses invested in a strategic direction and can see the benefits. By taking a consistent, strategic, and cross-functional approach to the current climate, these optimists are more likely to believe they’re steering their own course.

Pessimists (11%)

A smaller set of employers feels disempowered by the moment, though. Their perception of outcomes related to culture and productivity is drastically lower than optimists and indicates less investment in clear actions toward improving technology, onsite amenities, and further flexibility for the workforce. By not being proactive, these employers seem to have remained in a wait-and-see posture while the labor market and overall economic situation has shifted. These employers have not positioned themselves to attract new talent and their veterans may well continue to leave, further deteriorating confidence in their competitiveness.

Massive Middle (57%)

The majority of employers remain somewhere in between the highs and lows without a distinct perspective on productivity and culture outcomes. This shows that employers and employees alike are still undecided about what the future holds. There’s an opportunity here for those more forward-thinking employers among them to now start building leading strategies to help them win the race for talent.

“Some employees may feel empowered by work flexibility, seeing more opportunity for advancement with virtual assignments and a broader mix of employment opportunities.”

 

The vast majority of employees and employers seem to agree that the old status quo of the working world is gone. Most respondents agree that hybrid and flexible working conditions are here to stay, and employees are still prepared to switch jobs if they don’t find what they want. It then becomes more imperative than ever for employers to understand what the workforce most values.

From Pay to DE&I

The depth of collective reassessment of work can be seen in what people say they value. Inflationary pressures, the broader acceptance of remote work, and lower barriers to finding new jobs have all contributed to employees (79%) putting a premium on total pay and other tangible benefits. Employers (83%) agree that the pandemic has accelerated a need for extensive changes to rewards policies, encompassing compensation, wellbeing, flexible benefits, time off, and more.

Such rewards include multiple categories of incentives. A detailed look at the priorities of employers and employees actually reveals a noticeable misalignment between the two. Employees are much more likely to place more weight on compensation and career advancement, followed by work flexibility factors.

The Gap Between Employee and Employer Priorities – Employees

The Gap Between Employee and Employer Priorities – Employers

Pay also factored into how employees perceived Diversity, Equity, and Inclusion (DE&I), 20% of whom said that addressing pay equity is the single most important action a company should take to improve DE&I. Employers agree that more must be done to improve DE&I, but the largest number of employers (17%) cited reviewing hiring criteria as the most important action to take.

Some employees may feel empowered by work flexibility, seeing more opportunity for advancement with virtual assignments and a broader mix of employment opportunities. But there is also some acknowledgement that further acceptance of hybrid/flexible working conditions may risk slower career advancement. There’s a noticeable perception gap between employers and employees with 72% of employers believing new ways of working may cause some segments of the workforce to lose competitive advantage, compared to just 56% of employees.

For employers, pay represents a fixed cost during a time of growing inflation. Only 18% of employers believe pay increases/reviews are needed to address employee turnover, showing a clear disconnect to what employees say they want in a new role, and what employers are expecting to most deliver to help employees thrive. Employers, meanwhile, put more emphasis on learning and skills, flexibility, and employee psychological/mental wellbeing and safety.

Upskilling Committed Workers

The focus on learning and skills by employers could be a reaction to The Great Resignation. If turnover is high and employers show less confidence in productivity gains made through the pandemic, then an employer may be more likely to invest in upskilling the remaining workforce. This positioning from employers may also align with the needs and expectations of a subset of employees more likely to be company-committed. These individuals are more likely to be concerned about the risks of burnout and their mental wellbeing, more likely to work full-time in an office, and have a more favorable view of work-life balance. The strategies and priorities of most employers therefore appear to be in line with this segment of employees who show more loyalty to their present employer.

“Parsing the details of an organization’s workforce provides an opportunity for a bespoke solution to harmonize the priorities of employers and employees.”

 

The distinctions between groups which could be characterized as job jumpers versus the company committed, may be influenced by their professional sector, but also by generation. This highlights the importance of knowing the composition of the workforce to be able to respond to it appropriately.

Working Across Demographics

It may seem self-evident, but it bears emphasizing that the workforce is not a monolith and perceptions of wellbeing, value, and productivity can vary widely among workers based on demographics. The data shows wide gaps between self-perceived levels of wellbeing between geographic location, professional sector, gender, and seniority.

The survey results provide greater detail to generational preferences, especially around physical and organizational design and how the workforce will interact with the office. Gen Z is much more likely to put higher weight on the ability to stay socially connected while working (29%) than do Baby Boomers (21%). Gen Z also puts higher value on flexibility and the ability to have a change of work scenery (22%), compared to just 14% for Baby Boomers. Gen Z is also more likely to consider the design of an office/workspace as a driver to be in the office (12%) compared to Baby Boomers (7%).

Employees Likely to Leave Their Current Employer Are Embracing New Ways of Working

Broadly, the purpose of the physical office and how it influences the way work gets done depends on the demographic makeup of the workforce. Younger workers cite more informal social factors as potential drivers to being in the office, compared to a more utilitarian view from Gen X or Baby Boomers who are more likely to see the space as useful for collaboration. Parsing the details of an organization’s workforce provides an opportunity for a bespoke solution to harmonize the priorities of employers and employees.

5 Areas of Focus

The world of work is clearly in a state of transformation, spurred on by the challenges of recent years and the expectations of those to come. Manufacturing leaders should now consider finding cross-functional ways to respond to opportunities when they arise:

  1. Operationalize hybrid models: Hybrid work is here to stay, so employers should build a structure with intent. They need to understand which roles are best suited to remote/hybrid work, and build the systems required to create value while streamlining functions. This may include building an integrated mobility strategy to manage tax compliance for a geographically diverse workforce, along with structuring rewards and even real estate strategy to attract and retain the workforce they need.
  2. Reinvent the workplace: It’s not enough to repaint an office and expect workers to return to cubicles. Employers should consider a renewed integrated workplace plan that considers the physical space and amenities needed to empower productive workers. But it should also reflect how the workforce engages in social networking and learning both in the physical office and in the digital realm.
  3. Create a work-technology experience: From grocery shopping to hailing a cab, we all know the importance of a good user interface and design for business. A virtual workplace and employee experience platform should be on par with consumer technology providing a seamless technology experience across all work contexts. Done well, this can contribute to efforts identifying areas requiring culture change and moving the organization toward a more equitable reality.
  4. Reshape and optimize programs and career frameworks: The pandemic and so much more have redefined employee expectations, so employers should update their rewards and career advancement models to respond to a still fluid labor market.
  5. Define culture and organizational networks: Before fully undertaking a large-scale transformation, employers should also assess the fitness of their organizational culture. This includes understanding which key aspects of an organizational culture to preserve and how to engage key influencers to reduce friction toward the new physical and digital realities of work.

These areas of focus may differ between organizations, but leaders should work to find the right constellation of solutions that address the specific makeup of their workforce, the desired direction of their organization, and the continued assessment of transformation in progress.

Acting With Intent

Today, work is being reimagined by both employees and employers, but their visions don’t always align. Both see flexibility and hybrid work as the new normal, though further details reveal divisions. Employees are still willing to leave their jobs to advance their career and pay potential. Global uncertainty connected to inflation and labor costs are fueling reluctance among employers who are not eager to reset pay and career opportunities. If companies don’t address pay equity between internal and external labor markets, then efforts toward improving culture, productivity, and DE&I will be neutralized by labor turnover.

By acting with intentionality, and with a better understanding of employee perceptions and values in changing times, manufacturing leaders can build more trust across their workforce and orient their organizations toward a more optimistic future.  M

(Unless cited, all statistics in this article are from the EY 2022 Work Reimagined Survey. The views expressed by the authors are not necessarily those of Ernst & Young LLP or other members of the global EY organization.)


About the authors:

Kim Billeter is EY Americas People Advisory Services Leader.

 

 
Roselyn Feinsod is Principal, People Advisory Services, Ernst & Young LLP.

 

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